The Hershey Company (NYSE: HSY) Hershey makes many of the candy brands you’ll find in any convenience store, but historically high cocoa prices are weighing on the company. Cocoa prices have nearly tripled since 2022, making candy more expensive to make, which is hurting Hershey’s bottom line. Hershey expects full-year sales growth gains is expected to remain flat this year and weak growth prospects have caused the stock to fall 28% from previous highs.
Hershey, however, remains a profitable company that continues to pay dividends. The decline in the stock price has pushed the dividend yield well above Hershey’s historical average yield of 2.15%, and more than double the historical average yield of 2.15%. S&P 500 average of 1.32%. Here are three reasons to buy this magnificent dividend stocks now and keep it forever.
1. Hershey will bounce back
Although rising cocoa prices have had a negative impact on the business, management’s forecasts suggest that Hershey can handle this environment very well.
Hershey reported a 16% year-over-year sales decline in the second quarter, but excluding one-time items that impacted the top line, management said its core business posted a mid-single-digit sales decline, while international sales increased by mid-single digits.
Hershey expects full-year sales to rise about 2%, with adjusted earnings down slightly from 2023. It sees underdeveloped sales channels like e-commerce as an opportunity to improve top-line growth, in addition to new Halloween and holiday products that should bolster near-term sales.
2. The confectionery market will grow in the long term
According to Statista, the confectionery market is estimated at $133 billion and is expected to grow at a compound annual rate of nearly 5% through 2029. Hershey has several major brands to grow with the market and potentially gain market share in the long term.
Hershey’s brands include Cadbury, Reese’s, Twizzlers, KitKat and Jolly Rancher, as well as premium snacks like Skinny Pop. These brands have a broad sales network around the holidays. Having such a broad brand portfolio allows for relationships with retailers that can help Hershey market its products and increase sales.
3. Excellent dividend history
Despite a tough year, Hershey generated $1.8 billion in net income on $11 billion in revenue over the past four quarters. Its net income translated into adjusted earnings per share of $8.96, on which the company currently pays a quarterly dividend of $1.37. That brings the stock’s forward dividend yield to 2.75%, the highest it’s been in five years.
Hershey’s quarterly dividend has increased 77% over the past five years, and the company has paid 378 consecutive dividends over the past few decades. The company’s long history of dividend payments means it has a strong business model that has survived numerous recessions over the past century.
Keep in mind that the recent surge in cocoa prices will likely continue to weigh on Hershey’s earnings through 2025. Wall…
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